When my wife and I purchased our home my in laws lent us about $80k. We set up a fair interest rate and we've been making our monthly payments to them as agreed. We have every intention of paying them back, and they expect us too as well.
My father in law is paying taxes on the interest he's earning from us and he told us that we can claim the home mortgage interest deduction. I checked into it a bit and it's my understanding that I cannot, that we need to be issued a Form 1098 from our lender (him).
Can I take the home mortgage interest deduction? As a side question, should my father in law be paying taxes on the interest of our loan (in other words does he need to find a better tax guy)?
The money they lent us went towards our down payment. As I recall the bank wanted (and received) a letter, signed by us and my in-laws saying we do not have to repay the loan. However - like I said above - my wife are repaying the loan per our private agreement. There's no documentation for this agreement however.